UPDATE (30/12/21): NFM has reduced the proposed increase in retail prices of its flour products after the company received swift backlash following its initial announcement. Details here. With the increasing cost of wheat and freight globally, National Flour Mills Limited (NFM) announced today (Wednesday 29th December 2021) its decision to increase the wholesale price of flour by between 15% and 22%, with a suggested increase averaging 19% on the retail price of flour to the consumer. The company said it can no longer maintain prices in the face of rising international price increases. The price increase is set to take effect on 3rd January 2021. This decision, the company said, follows several internal initiatives to improve operating efficiency and reduce processing costs in an attempt to contain expenditure and maintain the price of flour, in the face of increased supply chain costs and soaring commodity prices. Flour prices have not been adjusted since 2008. Commenting on the decision, NFM CEO lan Mitchell said: "This was by no means an easy decision, as we did everything within our control to try to hold our prices; but with the staggering increases in raw material and shipping costs, we were left with no choice but to make the adjustment. We are acutely aware of the knock-on effect that an increase in the price of flour could have in the market, but we cannot sell a product for less than it costs to produce." NFM noted that the price of Spring Wheat moved from as low as US $5.00 per bushel in 2020, to as high as US $10.91 per bushel this year, additionally, the cost of freight has increased more than 110%. The company provided a graph to illustrate the increases in the price of wheat. During the past eighteen (18) months, NFM said it sought to offset the increasing external costs by focusing on productivity measures to optimize the levels of efficiency throughout its operations. Some of these measures ultimately resulted in the company being able to reduce indirect manufacturing cost per tonne by 4% despite a reduction in work hours necessitated by the COVID-19 Pandemic curfew. The company notes that increased prices of grain and the rise in supply chain costs are affecting markets worldwide. NFM said that generally, adverse weather conditions have affected crop yields, supply chain issues have increased the cost of agricultural inputs, like fertilizers; and the overall impact of COVID-19 has caused shipping costs to skyrocket. NFM Chairman Nigel Romano said: "It's an unfortunate analogy, especially given the realities of climate change, but we have been confronted by the perfect storm — 2020 witnessed the lowest wheat yields since 2007, and the supply chain disruptions caused by the Pandemic have increased freight costs significantly, further impacting the landed cost of all grain and other material inputs. NFM is a price taker. We have no control over the landed costs of our imported raw materials, which now account for 64% of our production costs. I think the team is doing a good job improving our internal processing and driving other costs down, especially during these trying times, and we will continue to find ways to continually improve." NFM PROVIDED THE FOLLOWING QUESTIONS AND ANSWERS: 1. What sort of knock-on effect can we expect with the cost of other food items like bread, roti and doubles which use flour as a main input?
2. Should the price of wheat return to its previous levels, would NFM be prepared to reduce prices?
3. Has the Government imposed price control on NFM?
4. The price of wheat has increased more than 100%, yet NFM has only increased prices by about 19%. Is this price increase sufficient to cover the increase in costs?
5. Has NFM communicated with the other manufacturers/distributors of flour to determine what the new price should be?
6. What can we expect of NFM’s financial performance given the price increase?
7. Is there expected to be any other increases in products by NFM, where wheat or flour is also a raw material input?
8. If the cost of grain continues the upward trend is there expected to be another price increase by NFM?
9. What impact will this increase have on the cost of a basket of goods to the consumer?
10. Has the price of flour been increased in other CARICOM countries?
This is a developing story - refresh this page for updates.
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